Sophos is calling it W32.Cuebot-K, a variation in the Cuebot family of malware. The worm has a range of malicious functions. After it's installed, the worm immediately tries to connect to two websites, a sign it may try to download other bad programs on the machine.

Worms that spread through IM (instant messaging) programs often appear as messages or links sent from friends, which trick a user into executing the program. Cuebot-K propagates by sending itself as a file named 'wgavn.exe' to more people in the user's 'Buddy List' but without a message, Cluley said.

If installed on a computer, Cuebot-K is registered as a new system device driver service named 'wgavn'. When a list of services running on the computer is summoned, the worm appears as 'Windows Genuine Advantage Validation Notification', Sophos said.

Related

The worm's ruse comes as Microsoft's WGA (Windows Genuine Advantage) program is being criticised for functioning like spyware. WGA collects hardware and software data on a user's computer and compares it to a database of licensed operating systems.

If an improper copy is detected, Microsoft warns the user and cuts off some free downloads.